Innkeepers Objects to Cerberus Call for $20 Million Deposit

Aug. 23 (Bloomberg) -- Innkeepers USA Trust objected to a
demand from Cerberus Capital Management LP and Chatham Lodging
Trust to recover a $20 million deposit for their now disputed
plan to acquire 64 of the bankrupt company’s hotels.

Innkeepers, an operator of 71 hotels including Residence
Inns, Marriotts and Hampton Inns, already has final court
approval of a bankruptcy plan that rests on the sale of 64
properties to Cerberus and Chatham. Cerberus and Chatham said
yesterday that they had ended the $1.12 billion agreement,
citing a possible adverse change that could affect Innkeepers’
long-term business. They didn’t state what the change was.

Cerberus and Chatham have demanded their $20 million
deposit back from Wells Fargo, according to a status report
filed in Manhattan court today. In an Aug. 19 letter to Wells
Fargo, they demanded that 90 percent be returned to Cerberus and
10 percent be returned to Chatham.

Innkeepers objected, saying in a separate letter to Wells
Fargo “there has not been an occurrence of any condition,
change, or development that could reasonably be expected to have
a material adverse effect” on its business since the deal was
agreed to in May.

As a result, Wells Fargo must keep the money until a court
rules on the dispute, Innkeepers said.

Kirkland & Ellis

Midland, servicer of an $825 million mortgage loan, said
Kirkland & Ellis’s request for $1.6 million should be partially
held back give uncertainties for all of Innkeepers’ interrelated
reorganization plans.

Cerberus and Chatham’s announcement that they’ll terminate
the purchase agreement raises “the question of whether such
plans will become effective,” lawyers for Midland wrote.

The case is In re Innkeepers USA Trust, 10-13800, U.S.
Bankruptcy Court, Southern District of New York (Manhattan).